Japan is set to pledge JPY 73.6 trillion (USD 707 billion) towards economic recovery. Prime Minister, Yoshihide Suga’s relief package will be approved by his cabinet later today.
• Suga announced that his government will be committed to maintain employment, keep businesses going, and open a path to growth through green and digital technologies in a bid to revive the economy.
Why it matters: This will be the first package to be passed under Suga’s administration who assumed office in September. The success of this relief package will be heavily determinant of the Prime Minister’s chances for re-election.
•Suga, while initially hailed for his hardline stance on tackling the pandemic, is witnessing dwindling approval ratings. This comes among his plans to expand the now-suspended Go To Travel programme that had come under fire for accelerating the spread of the coronavirus in the country.
• This will be the third additional fiscal stimulus put forward by Japan. Suga’s predecessor, Abe’s two earlier packages worth approximately 11% of the country’s GDP, totalled to JPY 234 trillion (USD 2.25 trillion).
• Japan is heavily debt-ridden, with an accumulated national debt of almost USD 11,269 billion as of September 2020. Despite JPY 19 trillion (USD 182 billion) being financed by leftover funds and the third extra budget, Suga’s fiscal plans are expected to increase Japan’s debt position further.
The stimulus package: In addition to pandemic containment, the package will primarily focus on boosting consumer spending, tourism and Japan’s efforts in digitalisation, as reported by Bloomberg.
• JPY 40 trillion (USD 384 billion) will go towards fiscal measures in pandemic recovery, supporting structural changes in a post-corona economy and creating additional reserves.
• Suga has pledged JPY 1.5 trillion (USD 14.5 billion) on providing subsidies to the hard-hit restaurant sector. He will also be putting forward another JPY 1.5 trillion into his Go To Travel subsidy program.
• In an attempt to achieve carbon neutrality, Japan is also set to establish a JPY 2 trillion (USD 19.2 billion) fund for firms working on the development of green technologies. Another JPY 1 trillion (USD 9.6 billion) has reportedly been allocated towards R&D of post-5G technology development. Suga has made the upgrading of digital infrastructure and 2050 carbon emission goals a part of his policy.
Looking ahead: Even though Japan’s economy rebounded by 23% last quarter, forecasts for future growth still remain tepid amid resurgent community infections.
• Bloomberg Opinion Columnist, Daniel Moss opined that while this package may just be enough to keep Suga in office for another term, he remains doubtful of the significant boost in consumer demand and spending it will bring about given the worsening pandemic.